Matchmaking, Money And Makeovers

The June issue of EPM includes stories about the overall financial state of U.S. ethanol plants, M&A, the conversion of a small ethanol plant to high-value ethanol production, the growing demand for biobased chemicals and more, writes Tom Bryan.

The U.S. ethanol industry has appreciably matured in the past six years, but it hasn’t lost its youthful propensity to take chances and explore new things. American ethanol producers are, today, among the most efficient, disciplined and financially sophisticated agribusinesses in the world. At the same time, the industry’s 200-plus facilities, still owned by roughly 100 different companies, are hungry for innovation, open to change and flexible enough to look at almost anything. This month’s issue of Ethanol Producer Magazine examines the ethanol industry’s current financial condition against the backdrop of its remarkable affinity for adaptation.

Our inspection of money management in the ethanol business begins with an instructive look at recent mergers and acquisitions within the sector. In “How Deals Square Up,” we see that ethanol plant M&A has historically been driven by distress and more transactions occur on the heels of downturns than after profitable periods. For comparison, there were nearly three dozen ethanol plants sold after the industry’s well-chronicled 2008-’09 downturn, but just five transactions during and after the recent period of record margins (see “Follow the Money” for more insight on what producers did, or plan to do, with last year’s earnings).

Investment bankers tell us, however, that financial distress isn’t the only thing that prompts ethanol plants to be sold. One recent deal, for example, included a seller that was a nonlong-term investor looking to cash out on a healthy asset. Another transaction was based on a strategy to convert a relatively small ethanol plant into a facility that can produce higher-margin chemicals, which is the focus of our cover story, “‘Back to the Future’ with N-butanol." In this feature, EPM Managing Editor Holly Jessen goes inside Green Biologic’s recent acquisition of Central Minnesota Ethanol Co-op in Little Falls, Minnesota. Green Biologic’s plan is to retrofit the plant to produce n-butanol and acetone while still making some ethanol. The nature of the deal illustrates the incredible versatility of dry-mill ethanol plants and shows us that acquisitions can be carried out with real people in mind. The deal was structured in a way that benefitted existing shareholders, plant employees and area farmers.

We look more downstream at biobased chemicals in “Stepping Up to a Currency Molecule.” In this piece, EPM Senior Editor Susanne Retka Schill reports on how a growing global demand for sustainable products is opening a huge door for renewable chemicals, some of which can be derived from, or made with, ethanol.

Finally, we look closely at the overall financial state of U.S. ethanol plants and how producers are leveraging the hard lessons of their recent past to run their businesses better. We learn in “Riding the Performance Curve,” that most producers are still financially comfortable, operating with healthy levels of working capital and generally looking at ways to reinvest in new assets and next-stage technologies.